Insurance Requirement Information

FOR EMPLOYERS

The manner or method by which you choose to insure your workers'
compensation liability is your decision. Should you have any questions
contact the Workers' Compensation Division at 1-800-528-5166 or (334)
242-2868.

If you regularly employ less than five (5) employees, full-time or part-time and including officers of a corporation in any one business, other than the business of constructing or assisting on-site in the construction of new single-family, detached residential dwellings, the Alabama Workers' Compensation Law does not require you to have workers' compensation insurance coverage. Employers of domestic employees, farm laborers, or casual employees and municipalities having a population of less than 2,000 (according to the most recent federal census) are not required to provide coverage but can elect to be covered by the provisions of the Alabama Workers' Compensation Law.

Why should you have workers' compensation coverage?

It is required by law.

It is the exclusive remedy for on-the-job injury and occupational
disease.

Having coverage enables you to have limited civil liability, avoid
double compensation, and avoid penalties and fines.

Alabama's Workers' Compensation Law provides significant and valuable
benefit to both employer and employee. The employee is guaranteed a "benefit
certain" in the event of an on-the-job injury or occupational disease.
The employer pays for this insurance. The employer is protected by the "exclusive
remedy" provisions of the Law. This means that an injured worker
is entitled only to the benefits required by law, thus the employer's
liability is limited.

DESCRIPTION: You can purchase an approved insurance
policy through a licensed insurance agent underwritten by an approved
insurance carrier who will write an insurance policy for you. This is
known as purchasing insurance coverage on the "voluntary market."

CANDIDATES: Any employer who has a low to medium
workers' compensation exposure or claim history.

SOURCES: Purchased through your insurance agent.

ADVANTAGES: Recognized by the State Courts.
Provides an approved policy at a reasonable price that is guaranteed
by the Alabama Insurance Guaranty Association. Your choice of buying
from the insurance carrier with the most competitive rates.

DISADVANTAGES: Insurance carrier determines
whether or not to renew your policy. You are subject to rate increases.

COMMENTS: The Alabama Department of Insurance
approves all insurance carriers, their policies and the agents who represent
them. A directory containing the names and addresses of approved insurance
carriers can be obtained from the Insurance Department.

DESCRIPTION : You can purchase insurance through
the Assigned Risk Pool when insurance carriers decline to write an insurance
policy for you. This is known as purchasing insurance coverage on the "involuntary
market."

CANDIDATES: Any employer who has a medium to
high workers' compensation exposure or claim history.

SOURCES: Administered by the National Council
on Compensation Insurance (NCCI). Purchased through your insurance agent.

ADVANTAGES: Provides an approved policy that
is recognized by the State Courts and is guaranteed by the Alabama Insurance
Guaranty Association.

DISADVANTAGES: High cost. No choice of insurance
carrier. Subject to rate increases.

COMMENTS: You must contact and be refused by
two insurance carriers and make direct application to the NCCI Assigned
Risk Pool through your insurance agent providing proof that the insurance
carriers turned you down. Insurance carriers participating in the Assigned
Risk Pool have been approved by the Alabama Department of Insurance.

DESCRIPTION: You can obtain coverage by joining
a group self-insurance fund. This is a common fund into which employers
have, by agreement, pooled their liabilities for the purpose of providing
Alabama workers' compensation benefits to their employees.

SOURCES: Purchased through your independent
insurance agent or by contacting the Group Fund Administrator.

ADVANTAGES: Recognized by the State Courts.
Approved and regulated by the Alabama Department of Labor.
Provides workers' compensation liability coverage at a reasonable price.
Choice of joining with a variety of Funds. Attractive rates.

DISADVANTAGES: The Fund determines whether or
not to renew your membership. Subject to rate increases. In the
event that the Fund becomes insolvent, you can be assessed to make up
the monetary shortages (this is known as Joint & Several liability).

COMMENTS: The names, addresses and telephone
numbers of most approved group self-insurance funds can be obtained from
the Workers' Compensation Division of the Alabama Department of Labor
or you can call the Self-Insurance Section at 1-800-528-5166 and request
the name of the most appropriate group fund for your class or business.

DESCRIPTION: You can become a self-insurer.
This is a long-term commitment by which a financially strong employer
pays benefits to injured employees as mandated by the Alabama Workers'
Compensation Law.

CANDIDATES: Any employer who meets the following
four financial qualifications: (1) audited financial statements; (2)
a $5 million minimum net worth; (3) current assets to current liabilities
ratio of 1.0 or greater; and (4) a positive net income. You may conduct
a feasibility analysis to determine if it is cost effective for you to
self-insure.

SOURCES: Employer's
application for self-insurance in PDF. You can also obtain
an individual self-insurance packet by writing to the Department of
Labor Workers' Compensation Division, 649 Monroe St.,
Montgomery, Alabama 36131, or speak to an employee in the Self-Insurance
Section at 1-800-528-5166, or contact an insurance agent that specializes
in the field of self-insurance.

ADVANTAGES: Recognized by the State Courts.
Hands-on management of claims, legal issues and safety programs.

NOTE: DO NOT CONFUSE EMPLOYEE LEASING COMPANIES WITH TEMPORARY
HELP AGENCIES.

Employee leasing is not an alternative to workers' compensation but
rather an employment alternative.

An employee leasing arrangement is an arrangement whereby an employer
contracts with an employee leasing company to provide the services of
leased employees. Under a typical arrangement, a participating employer
transfers his employees to an employee leasing company and then leases
the same employees back from the employee leasing company. The employer
or client company in this arrangement pays the employee leasing company
for all of his employees' earned wages, fringe benefits, mandated employee
benefit programs, and all government withholdings. In return, the leasing
company separates all of the payroll withholding items and makes those
payments in addition to paying all of the employees' earned wages. The
benefit of this kind of arrangement includes cost savings from large
group health insurance rates that an employee leasing company can offer
participating employers because of the large number of employees. Other
administrative services may also be included.

WARNING:ALTHOUGH THERE ARE MANY LEGITIMATE
EMPLOYEE LEASING COMPANIES, THERE ARE ALSO EMPLOYEE LEASING COMPANIES
THAT MAY NOT BE OPERATING IN FULL COMPLIANCE WITH THE LAW. IF YOU CONTRACT
WITH ONE OPERATING OUTSIDE THE LAW, YOU COULD BE AT THE SAME RISK AS
YOU WOULD BE IF YOU HAD NO COVERAGE. YOU SHOULD SEEK LEGAL ADVICE BEFORE
CONTRACTING WITH A LEASING
COMPANY.